Total and PSA invest in battery company to develop electric vehicles

On Total’s website, the company announced its battery joint venture with PSA, Automotive Cell Company (ACC), during French President Emmanuel Macron’s visit to Saft’s Nersac plant. This further demonstrates that both Germany and France agree on the long-term development of electric vehicles and are both building their own battery industries in the hope of being competitive in the era of electric vehicles. 

Figure 1: Battery factories in France are all supported by the government

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The joint venture Automotive Cell Company                              
was reported long ago. The first step of this joint venture factory is to come out and be implemented in several steps. Total, through its subsidiary Saft, and PSA&Opel have joined hands to establish a joint venture battery company, with the goal of starting production of power batteries in 2023. The first phase of the project is mainly in the research and development stage, including the construction of a pilot line at the Saft Nersac plant, which is scheduled to start in mid-2021 with an investment of 200 million euros. 

Figure 2 Investment of the first phase of pilot production line

The construction of the first phase will directly affect subsequent decisions. If the development goes smoothly, the investment will be made in the factory in the Hauts-de-France region in northern France. If all goes well, 8 GWh will be built first, and then increased to 24 GWh. Then a factory with similar capacity will be built in Germany, and the total output is planned to reach 48 GWh in 2030. It will take nearly 5 billion euros to complete this ambitious plan, and the project is expected to receive nearly 1.3 billion euros in public funds from the Important Projects of Common European Interest (IPCEI).

Figure 3 Rendering of the battery factory of Total and PSA Group 

Note: The above is based on the "Launch of a Pilot Plant to Manufacture European Batteries for Electric Vehicles" published on the Total website. 

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Is it reliable for Saft to take the lead?
We have discussed before that starting from 2020, PSA, Opel, and  FCA  will all invest in very aggressive electrification strategies to avoid many carbon emission fines.

2019 100% OF NEW MODELS ELECTRIC or HYBRID version for each new launch +15 electrified vehicles by early 2021

2025 100% OF THE RANGE EVERY PSA's vehicle with an ELECTRIC or HYBRID version

Given the situation in Wuhan, we should take a short break.

The pilot line led by 200 people is going to shift Saft's previous application scenarios of industry, energy storage, aviation and military industry, as shown in the figure below, from 788 million euros in sales to a large number of automotive power batteries, which can match the current price status of CATL and LG Chem. From the perspective of the supply chain, it is very difficult. However, in 2019, Saft signed an agreement with Tianneng Energy Technology Co., Ltd. to establish a joint venture to build a 5.5GWh battery factory in Changxing, Zhejiang, with Saft holding a 40% stake. There is a potential possibility that Saft will take two routes, just like Northvolt invested by Volkswagen. Although the battery development is in Europe, the entire production line equipment and many supply links are purchased and optimized from China. 

Figure 4 Saft’s sales in 2018 

From this perspective, we can understand that the two major European automobile groups will rely on LG Chem and CATL, the two mainstream suppliers of soft packs and square shells in the short term from 2020 to 2022 (both battery companies will establish production capacity and supply chains in Europe to sow the seeds first), and then cultivate European battery cell production companies with the support of the European government, and gradually transfer employment to this direction. At present, South Korea's SK and SDI are both backups of the second echelon, and the other Chinese companies invited to build factories in Europe are also considered the second echelon.

 Summary: The main line of lithium batteries and electric vehicles in 2020 will not change. However, due to the impact of the current epidemic, the capacity utilization rate of Chinese factories is not high, and the demand in Europe may not be accepted by exports from China. At present, we need to be well prepared for March-June, which will have a significant impact on this year.